DET is a charitable company which holds the land upon which the Durand Academy operates. The Commission had been engaging with DET since October 2014 and identified regulatory concerns in the course of its involvement. Among the concerns was the potential lack of separation in governance terms between DET and the Durand Academy Trust (DAT), an exempt charity, which runs the school and which is accountable to the Education Funding Agency.

In view of heightened public interest in ensuring that DET’s charitable property was being adequately safeguarded, the Commission opened a statutory inquiry into DET on 11 February 2015. The inquiry examined the governance of the charity and trustee decision making, in particular relating to a contract awarded in 2012 to a service company owned by the then executive head teacher of Durand Academy (‘the 2012 contract’). The 2012 contract involved accommodation and leisure facilities on land held by DET. The then executive head teacher was also a trustee of DET and DAT at the time the contract was awarded.

While the Commission recognises that those involved did what they considered at the time to be in the best interests of the Academy, the Commission concluded that the then trustees did not fully discharge their duties and responsibilities as charity trustees, partly because they did not distinguish between the charity and other legally separate entities connected to Durand Academy. A network of different bodies such as this, with interlinking relationships, results in inherent conflicts of interest when the different bodies are transacting with each other. In this case, some of the conflicts of interest were not properly identified and/or adequately managed. The decision to award the 2012 contract should have been authorised by the trustees of DET. It was not. It was instead authorised by the trustees of DAT, who did not have the authority to act on behalf of DET.

The Commission directed the trustees to review the relationship with the service company owned by the then executive head teacher and undertake a benchmarking exercise.

For the reasons set out in the Commission’s report, the trustees were unable to demonstrate to the inquiry’s satisfaction that the level of remuneration to a service company owned by the then executive head teacher was ‘reasonable in all the circumstances’. The Commission therefore concluded that the original remuneration terms of the 2012 contract were too generous.

However, the trustees of DET acted responsibly by taking action to address this matter by agreeing a reduction in the special payment due at the termination of the 2012 contract. This will result in an estimated financial benefit of around £1 million for DET and its subsidiary company.

The Commission recognises the vision and drive the former executive head teacher had in both the development of the school sites and the generation of additional income to support the school’s activities. The pupils have benefited both from the direct use of those enhanced facilities, as well as approximately £3.7 million additional finances which has been gifted from trading activities since 1997 to support the school’s activities.

However, the Commission also considers that these arrangements with a single provider have resulted in a business continuity risk that has not yet been addressed by the charity.

The Commission is pleased that DET has agreed that it needs to take further steps to improve its governance. The Commission has issued DET with an action plan and will monitor the charity to ensure that these actions are implemented.

Michelle Russell, Director of Investigations, Monitoring and Enforcement at the Charity Commission, said:

This case is a reminder of the importance of trustees being aware of their duties and responsibilities when making decisions and the need for clear governance processes to be in place.

Where there is a complex arrangement of interconnected bodies, the risk of conflict of interests needs to be recognised, addressed and subsequently monitored by the charity and its trustees.

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